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Auto Insurance Often Costlier, Renters Pay $112 More A Year For Car Insurance

By Grishma Giri
Published on: 08:58 PST, Feb 16, 2016

Do you see any relation between owning a home and your car insurance premiums? Probably not, but a new study concludes that not owning a home can cost you financially as renters are penalized more.

Consumers who rent homes and don’t have their own pay about 7 percent more on average for annual car insurance premiums despite having stellar driving records, says Consumer Federation of America’s analysis of premium quotes.

The price difference is extreme in some markets depending on the type of insurers, finds the study. Auto insurance premium quotes for renters in Louisville, Ky., averaged 13 percent more than those for homeowners, while one insurer in that market, Farmers Insurance, quoted a rate that was 47 percent higher, reports the New York Times. That brings down the figures to $112 a year more nationally and $77 more in the Valley.

“To raise people’s auto insurance premium because they can’t afford to buy their homes unfairly discriminates against lower-income drivers,” said J. Robert Hunter, CFA’s Insurance Director and the former Insurance Commissioner of Texas.

“A good driver is a good driver whether she rents or owns her home. Insurance companies should not be allowed to target people based on home-ownership status.”

The analysis was carried out by working on several factors that are used to set car insurance premiums and objects to the use of non-driving criteria including college degrees and credit scores. The federation argues that the practice is unfair because minimum auto insurance is mandatory in most states in the U.S.

“People are being charged extra just for being poor,” said Douglas Heller, a consumer advocate who helped conduct the analysis.

Austin-based online auto insurance comparison platform The Zebra, founded by Adam Lyons and serial entrepreneur Josh Dziabiak in 2012 helps consumers get transparent quote comparison across insurers and understand how rates are determined by companies, The Inquisitr previously reported.

“The Zebra offers its customers real-time quotes by only filling out a simple online form that asks for the driver’s age, credit score, and driving record. As the company is not a pure-play insurance agency, there’s no incentive to bias the results for one insurance company or another. Given that nearly 50 percent of U.S. consumers compare shop for auto insurance each year, The Zebra is a bet that people will prefer to compare insurance quotes on one platform rather than spend fifteen minutes collecting quotes from each potential insurer on their own.”

Known as the Kayak for car insurance, the company is the first to provide consumers with car-insurance quote comparisons in what amounts to a sleepy, opaque $220 billion market. The Zebra just raised an additional $17 million in its Series A round of funding, which included Mark Cuban as an investor.

Similarly, the cost of fully comprehensive car insurance policy has raised by over $100 in a space of a year, reports AA Insurance. Laws regarding car accidents is what costs the most if the owners gets involved in an accident because of the cost involved in hiring car accident lawyer, fines if found guilty and the repairing cost. However, the return for both renters and homeowners provided by car insurance premiums is the same.

However, incidents involving police vehicles in accidents are dismissed in the US. Police vehicles are specifically exempt from the state law designed to hold vehicle owners liable for the negligence of those whom they allow to drive their vehicles, the Appellate Division, First Department, said.

The breakdown and insurance provider analysed the average cost of a fully comprehensive car insurance policy during the last quarter of 2015, and found that even those who shop around will pay on average £625.70 – up by £105.64 when compared with the last three months of 2014.

The widespread practice of homeowners receiving discounts is what has been the major cause for renters in paying more for auto insurance. “Insurance pricing, including discounts, is subject to rigorous actuarial standards and state regulation which ensure that all rating factors comply with the law,” said David Synder, a vice president at the Property Casualty Insurers Association of America, in a statement.

Nationwide, an auto-insurance company said that it offers auto-insurance protection to customers, regardless of residential status. “We reward loyal members who insure both their auto and home with our company by providing additional discounts that reflect their better claims performance,” the company said in a statement.

The analysis was carried out in 10 large metro areas by the consumer groups including State Farm, Geico, Allstate, Progressive, Farmers, Liberty Mutual, and Nationwide. The analysis took premiums for a typical 30-year-old female motorist as a subject who owns a 2005 Honda Civic and a perfect driving record. The only characteristic that changed was whether the motorist owns or rents a home.

Farmers Insurance was the one that charged 47 percent more for renters than homeowners, the wildest discrepancy. For renters in Chicago, the renters were offered premiums 11 percent below homeowners by Allstate.

Similarly, the widest auto-cost gaps faced by renters were in Louisville and Tampa, while the lowest differences were in Portland and Chicago. The Zebra is looking to close that gap. The company delivered 3.5 million car-insurance quotes in 2015, claiming that it saved drivers an average of $368 per year.

[Photo by Carl Court/Getty Images]

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